Eco Investor May 2017

Features

Cobalt and the Battery Boom

The unfolding energy storage boom is a long way from slowing down and has grown from lithium to other battery metals such as cobalt. The demand for cobalt is projected to grow strongly for years to come and prices for the metal have more than doubled in the last two years - from US$10 to US$25 per pound or about US$55,000 per tonne, and are now at an eight year high. All this has prompted a boom in listed cobalt stocks through IPOs and other mineral companies dusting off and polishing up their old cobalt resources.

Until recently cobalt has been an important but little known part of battery based energy storage. Cobalt's key role is in the cathode. The cathode and the anode are the two electrodes in a battery between which the electrical current flows. Lithium batteries are said to contain more cobalt than lithium, with the active part of the cathode up to 60 per cent cobalt. In much lesser quantities, cobalt is also used in nickel-cadmium and nickel-metal hydride batteries. In rechargeable batteries cobalt is important for conductivity and energy density, and it also adds to safety and longevity.

Cobalt is seen as crucial to the future of battery based energy storage, and the main driver of medium and long term demand is expected to be electric cars. But supply has been a major issue as just over half of the world's supply comes from the Democratic Republic of Congo where there are political instability and ethical sourcing issues. Another dozen countries including Australia supply the balance but all of these are small producers as the cobalt is a byproduct of mining other minerals such as copper and nickel.

The big producers are Glencore with 10 per cent, Freeport McMoran 9 per cent, and Umicore and Sumitomo with 6 per cent each. Many smaller producers make up the rest including Chinese state industries that refine cobalt from ores. There are a number of cobalt miners and explorers that are listed in the US and Canada, as well as Australia.

True to form, Australia's speculative mining sector has spotted the opportunity and been quick to ramp up exploration and production. The list of these cobalt aspirants is now quite long, but before we take a look at each one it is worth noting that there are also several ASX listed companies followed by Eco Investor are in the early stages of developing a cobalt business. These are Clean TeQ, Australian Vanadium and Neometals.

Apart from Cobalt Blue, none of the ASX listed companies below is a pure cobalt play. All are speculative investments with their cobalt businesses at an early stage of development.

Clean TeQ Holdings

Clean TeQ is developing its Syerston nickel, cobalt and scandium mine in outback NSW. The company says this is Australia's largest undeveloped nickel/ cobalt resource and the cobalt grades mean it could become one of the largest global suppliers of the metal outside of Africa. The plan for cobalt is to target the supply of cathode raw materials to the lithium-ion battery industry.

A Nickel/ Cobalt Project Prefeasibility Study is assessing the potential for a 1.5-2.5 million tonne per annum mine to produce high purity nickel sulphate and cobalt sulphate products. The project has the potential to generate significant scandium as a by-product.

"Syerston's high cobalt grades, combined with Clean TeQ's proprietary ion exchange technology to produce the specific cobalt and nickel sulphates required by lithium-ion cell manufacturers, positions the company to benefit from strong forecast growth in demand for lithium-ion batteries," says the company.

But developing the mine will involve a huge capital cost, $906 million at the last estimate. So an investment in Clean TeQ is speculative and far from a cobalt pure play as the company is aiming to supply scandium for light weight alloys in the transport sector, nickel and cobalt for the lithium-ion battery market, and is developing a wastewater treatment business in China. (ASX: CLQ)

Australian Vanadium

Australian Vanadium is a vertically integrated vanadium miner and vanadium battery supplier, it has a lithium-tantalum subsidiary, and is looking to add cobalt to its battery minerals. Its Gabanintha Vanadium Project near Meekatharra in WA, said to be among the highest grade vanadium projects in the world, also has cobalt. The company says there is an increase in demand from consumers for ethically sourced cobalt. It plans further modeling and evaluation of the cobalt resource and potential at Gabanintha. So the project is at an early stage, and the company is not a pure cobalt play. (ASX: AVL)

Neometals

Neometals is a lithium mining company, technology developer and an aspiring recyler of cobalt from consumer electronics batteries. The company has co-developed a technology to economically recover 99.2 per cent of the high value cobalt so it can be recycled into battery making. Over half of lithium ion batteries contain lithium cobalt chemistry, it said, but currently less than 5 per cent of used lithium ion batteries are recycled. Disposal is usually paid-for recycling or landfill. Neometals' subsidiary, Urban Mining Pty Ltd, holds its interest in the intellectual property and manages the commercialization of the technology.

The next step is a continuous operation, pilot scale hydrometallurgical plant to accelerate the evaluation of the recovery of high purity cobalt and the future recovery of lithium, nickel, copper and aluminium. If that works, a feasibility study will follow. (ASX: NMT)

Cobalt Blue

Cobalt Blue Holdings Ltd listed on the ASX on 31 January after raising $10 million at 20 cents per share. It listed with 72,325,316 shares, giving it a market capitalization of $14.4 million.

Cobalt Blue is focused on developing its Thackaringa Cobalt Project near Broken Hill in NSW. Chairman Robert Biancardi says the company has the team and the strategic relationships to become a leading cobalt producer.

The company began last year as a subsidiary of Broken Hill Prospecting Ltd, and an in specie distribution of shares means BPL shareholders had 35 million of the shares post IPO. BPL has a farm-in joint venture agreement with Cobalt Blue which means it will initially acquire 51 per cent of the Thackaringa. An exploration and development drilling program are planned for Thackaringa Cobalt Project and if exploration milestones are met Cobalt Blue will progressively acquire 100 per cent of the Project.

The IPO capital will help pay for the exploration and drilling program and technical studies to assess the commercialization of cobalt. It also provided working capital. The company is also looking at acquiring new exploration areas, and perhaps investing in rechargeable battery and energy storage technology.

The company says it has one of the largest cobalt exploration programs on the ASX, and is looking to increase the inferred resource at Thackaringa from 27,500 tonnes of contained cobalt to over 88,000 tonnes. The operation will be pure cobalt with no other minerals, which the company says gives it the strongest leverage to cobalt among all ASX stocks.

Thackaringa is put forward as a large and clean ore body that can be mined in a low cost operation. The company plans to have a scoping study by June this year, followed by an indicative feasibility study by June 2018, a bankable feasibility study and project approvals by June 2019 and project finance and a decision to mine by June 2020.

Post IPO, Cobalt Blue's shares have traded above the 20 cents issue price and peaked at 39.5 cents before settling back to around 25 cents.

Cobalt Blue is a pre-revenue business and will likely need to raise further capital down the track. (ASX: COB)

Equator Resources

Equator Resources is an explorer focused on cobalt. The company has four mineral assets in the cobalt region of Ontario in Canada and is now exploring these. Historical samples have shown grades of up to 12.3 per cent cobalt. The region is established with export infrastructure and previous cobalt and silver mines.

The assets are the Cobalt Town Project, the Silverfields Project, the Silver Centre Project, and the Lorrain Valley Project. Some of these are also prospective for silver.

Meanwhile, the company is one of the few pure play cobalt companies on the ASX. Its assets have potential but its exploration days are early and the company is a long way from being a producer. (ASX: EQU)

Barra Resources

Barra Resources is a gold and nickel explorer with four early stage projects in WA. It is exploring for gold at Phillips Find and Burbanks, both near Kalgoorlie, and it has a 30 per cent interest in the nickel rights to the Riverina Joint Venture north of Kalgoorlie, but there are no current plans to explore for nickel.

The cobalt angle is its 50 per cent interest in the Mt Thirsty Cobalt-Nickel Oxide Deposit near Norseman, which is at the pre-feasibility stage. Barra Resources says Mt Thirsty has a world-class cobalt-nickel oxide deposit and the potential to become "one of the world's top ten cobalt suppliers". A 2004 report put the total resource at 32 million tonnes with a grading of 0.13 per cent cobalt and 0.56 per cent nickel. Studies are looking at development strategies including treatment processes. The estimated mine life is 10 to 20 years.

The rising cobalt price has put the company's attention on the Mt Thirsty Cobalt Project and it is working to progress it. Barra earns modest royalties from gold, and is an active gold explorer. The company is one to keep an eye on if the gold angle is not an issue. (ASX: BAR)

Capital Mining

Capital Mining is a minerals explorer with two projects in NSW for gold, base metals, and copper; and four lithium projects in WA in the Gascoyne, Ravensthorpe and Yalgoo regions. It also has tenements in Ireland that are prospective for lithium.

The company's entre to cobalt came last month when it exercised options to acquire the Scotia Nickel-Cobalt Project in the WA goldfields. Historical drilling had identified "widespread cobalt mineralization" and this is yet to be fully explored. Four initial areas have been targeted with plans for first phase drilling.

The cobalt and lithium angles make Capital Mining interesting but it does not look likely to become a pure battery metals play as it is also looking at investing in a medicinal cannabis business in North America as well as having its NSW minerals assets. (ASX: CMY)

Cape Lambert Resources

Cape Lambert Resources is a diversified minerals investor and developer with interests in exploration and mining companies in iron ore, copper, gold, uranium, manganese, lithium and lead-silver-zinc in Australia, Europe, Africa and South America.

In February the company entered a 50/50 joint venture with Congolese company Paragon Mining SARL to develop cobalt and copper projects in the Democratic Republic of Congo. This will initially focus on the Kipushi Cobalt Tailings Project and the Kasombo Copper-Cobalt Project. The company said several other high grade cobalt projects are under review. The JV will operate the Kipushi Processing Plant to process the Kipushi tailings and treat additional hard rock cobalt and copper material. The Kipushi Processing Plant was commissioned in 2016 and can produce 4,000 tonnes per annum of cobalt, 10,000 tpa of copper and 2,000 tpa of zinc in concentrate from the tailings. The JV aims to commence mining activities and tailings retreatment within the next four months and offtake discussions are underway.

Cape Lambert also has a 21.9 per cent interest in European Lithium Ltd, which has interests in lithium, and precious and base metals. Its focus is the development of the Wolfsberg Lithium project in Austria, in which it has an 80 per cent interest.

However, Cape Lambert has a 17 per cent interest in ASX listed Cauldron Energy, which is exploring for uranium in Argentina and Australia. At present it makes no revenue from uranium. While this uranium investment is likely to dampen enthusiasm for Cape Lambert among most environmental investors, Cape Lambert has the advantage of potentially near term cobalt production, albeit with copper and zinc. (ASX: CFE)

Australian cobalt resources by company. Source: Ardea

Artemis Resources

Artemis Resources is another diversified WA explorer with a focus on gold, copper, nickel, zinc, platinum, iron ore and graphite projects. Artemis owns Karratha Metals Limited, which has interests in 41 tenements in the West Pilbara region covering 700 square kilometres and which is prospective for gold, copper, zinc, cobalt and nickel.

Artemis is acquiring the Radio Hill plant near Karratha. Last month an independent review said the capital cost to upgrade the plant to full operation as a copper/ nickel/ cobalt treatment facility is less than previously thought, and that adding a gravity gold circuit could shorten the path to commercialization of Artemis' cobalt, copper and gold assets near the plant. Recent drilling has led to increases in mineralization at the company's nearby Carlow Castle cobalt/ copper/ gold project.

But Artemis recently commenced gold production at its Nickol River project and re-commenced production at its Whundo Copper Mine. So for the near future at least it looks that cobalt is unlikely to play a major role in the company's activities and revenue. (ASX: ARV)

Platina Resources

Platina Resources is another diversified explorer. Its interest is in precious and specialty metals including platinum and scandium. It says its main project, at Owendale in central NSW, is one of the largest and highest grade scandium deposits in the world and has the potential to be a scandium producer with cobalt, platinum and nickel on the side. Total in-situ scandium oxide is 16,500 tonnes. Total in-situ cobalt is 13,200 tonnes. Platina says it wants to get Owendale into production as soon as possible. A feasibility study is due in early 2018.

The company also owns the Skaergaard project in Greenland. This is said to be a major undeveloped gold deposit and one of the largest palladium resources outside of South Africa and Russia. It also has other precious and specialty metal prospects in Australia and Greenland.

The combination of scandium and cobalt makes Platina Resources interesting to environmental investors. (ASX: PGM)

Ardea Resources

Ardea Resources is a diversified minerals explorer with numerous projects in WA and NSW. The company says that its Kalgoorlie Nickel Project (KNP) has 386,400 tonnes of contained cobalt metal and is Australia's and the developed world's largest cobalt resource. The KNP also has 5.6 million tonnes of nickel, and the semi-precious gemstone chrysoprase. An upcoming drilling and metallurgical study will move the project towards a pre-feasibility study on feedstocks for the lithium ion battery industry.

Growing demand for cobalt means the company is now putting a higher focus on cobalt from the KNP to supply the battery market. While the KNP looks to be its immediate project, Ardea has another 10 exploration projects looking for gold, zinc, nickel, copper, molybdenum, rhenium, silver, and tungsten. The company's assets and activities are so diversified that the KNP and its cobalt assets will need to take off in a big way for the company to be attractive to environmental investors.

Ardea listed in February at 20 cents per share and these quickly rose to 90 cents before coming back to around 50 cents. (ASX: ARL)

Kairos Minerals

Kairos Minerals is a lithium, gold, nickel and copper explorer with a new cobalt interest. It has several projects: the Mt York Lithium-Gold Project near Port Hedland in WA; the Roe Hills Gold-Nickel Project near Kalgoorlie; the Dingo Range Nickel Project north of Leonora in WA; and the Fraser Range East Nickel, Copper, Gold Project in southern WA.

The cobalt interest is more recent with cobalt potential having been identified at the Roe Hills Gold-Nickel Project. The company said an extensive zone near the surface has been identified from historical drill data as having cobalt mineralization with a high-grade of up to 1.16 per cent cobalt. Additional fieldwork to assess the cobalt potential and a drilling program are imminent.

The drilling program also includes nickel and copper. Significant gold results have already been reported, so it remains to be seen how important the cobalt component of the project will be. (ASX: KAI)

Riva Resources

Riva Resources is a diversified minerals explorer with three projects in WA targeting cobalt, gold, iron ore and base metals.

Its main project is the Tabac Cobalt-Gold Project near Wiluna and based on previous drilling this is described as being a significant cobalt-gold exploration target in scale and grade. Further work is required to confirm the cobalt resource and drilling is now underway.

Meanwhile, Riva's most advanced project is the Pilbara Iron Project near Tom Price. The company says the project is ideally placed to be one of the Pilbara's next producing iron ore mines. The company's third asset, the Ashburton Project in the Ashburton Basin, is also prospective for iron ore. So cobalt may take a back seat for the immediate to mid term. (ASX: RIR)

Tiger Resources

Tiger Resources is a copper producer and explorer for copper and cobalt in the Katanga Copper Belt in the Democratic Republic of Congo. Its prospective projects cover 1,550 square kilometres. The Kipoi Copper Project is operated by Société d'Exploitation de Kipoi (SEK), a 95 per cent subsidiary of Tiger. This is producing copper cathode. While Tiger Resources' assets have some cobalt, and a study has recommended test work for a 1,000 tonnes per annum cobalt hydroxide circuit, it remains to be seen how big a role cobalt may play. Given the company's much larger copper assets, cobalt seems unlikely to replace copper as its main activity. (ASX: TGS)

Hammer Metals

Hammer Metals is exploring its Mount Isa Project Hub in northern Queensland, which has copper, gold and molybdenum. Its Mt Morgan Project Hub in central Queensland is prospective for copper and gold. In December last year it found cobalt, copper and gold at its Millennium Project at Mt Isa. Drilling continues so it is very early days. (ASX: HMX)

GME Resources

GME Resources is a nickel, cobalt and gold explorer. It is developing its NiWest Nickel-Cobalt Project near Leonora in WA. NiWest is estimated to contain 830,000 tonnes of nickel metal and 52,000 tonnes of cobalt. The company said it is one of the largest undeveloped nickel and cobalt resources in Australia. The project is at an advanced stage and will be ready for development when a metallurgical test program is completed.

GME also owns several prospective gold projects in the Leonora–Laverton region and it says these have potential to provide near term cash flow. Four batches of ore have been processed and the first sale of gold ore from these has been finalized. GME is an active gold explorer and developer and this along with nickel is likely to keep cobalt from becoming its main activity. (ASX: GME)

Cassini Resources

Cassini Resources is developing the West Musgrave project in WA for nickel and copper. Studies have confirmed the economic viability of the Nebo-Babel deposits and strong potential to become a low cost operation with an initial mine life of over 15 years. The Nebo-Babel deposits also contain around 30,000 tonnes of cobalt.

In March the company said it has the potential to identify new cobalt resources to complement Nebo-Babel development.

Although there is a large amount of contained cobalt in the Nebo-Babel deposits, these would produced as a by-product of the nickel and copper production. A 2015 Scoping Study had demonstrated production of around 500 tonnes per annum cobalt in concentrate but the company said the spot price for cobalt is now 95 per cent higher than the price used in 2015.

Further Scoping Study work now underway will include new mine optimization and financial modeling, and a significantly higher long-term cobalt price than the previous study.

Cassini has an early stage mainly lead-zinc exploration project at West Arunta in WA's Gibson Desert and a gold exploration and development project at Mt Squires in central WA. (ASX: CZI)

Aeon Metals

Aeon Metals is a base metals explorer in Queensland. It says its tenements are prospective for copper, gold, lead, zinc, cobalt, molybdenum and silver. The most advanced project is the Walford Creek Project. This has 296,000 tonnes of copper, 160,000 tonnes of cobalt, 623,000 tonnes of zinc, 626,000 tonnes of lead, and 55 million ounces of silver. The company says this the largest and most advanced sulphide cobalt resource in Australia. A Preliminary Economic Assessment for the development of the high grade Vardy Zone within the Walford Creek Project indicates the project was technically and economically sound. Aeon's many other early stage projects do not involve cobalt. (ASX: AML)

CuDECOo, Metals X, Havilah Resources, Highlands Pacific

Several companies are developing projects where cobalt is minor to other minerals. Among these, CuDECO is a minerals explorer transitioning to a producer of mineral concentrates. The company is focused on bringing its Rocklands Group Copper Project into production. This also has cobalt and gold. Metals X has cobalt minor to gold and other metals. Havilah Resources and Highland Pacific have cobalt minor to other metals.